tv Bloomberg Markets Middle East Bloomberg September 25, 2016 12:00am-1:01am EDT
welcome to the program. a jampacked week ahead as we count down to the talks in algiers. we saw i very volatile and dramatic day for crude oil. take a look at this. saudi arabia was dismissing the prospects for an output freeze. it tumbled as much as 10% in new york trade. 20% of theve average. the proposal basically was that the saudi's one lower their production in exchange for iran freezing their production. that has not gone through just yet. only two out of three analysts surveyed think an agreement is likely.
algiers is also pressuring numbers from the baker hughes now up to 400 and 18 -- 418 rates. let's take a closer look at how the u.s. markets closed. the dow and nasdaq closed lower. feareddaq losing ground in the middle east, we're just two hours from the opening. this is a picture which shows you the reaction to the decision by the federal reserve to keep the policy rate unchanged. dubai up 2%. dobby --s for every abu dhabi. bear in mind that the saudi market was closed. -- the only weak spot in the picture for the most part
with egypt. we will talk about that later in the program. let's check in now with the first word headlines from around the world. make cuts of about a quarter of its investment banking jobs in asia. a person familiar with the matter says the bank will get rid of 75 jobs in the region later this year because of the slumped in deal making. worst asiag its ranking since 2008. is that germany is counting down to a national election. the finances of deutsche bank are raising concerns. a magazine reports that angela merkel has failed to support deutsche bank, which may be
sanctioned. syrian and rational airplanes -- russian warplanes have lost another assault. the escalation is being described as chilling. leftecent bombings have nearly 2 million people without access to clean water. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 160 countries. -- 120 countries. this is bloomberg. oil is tumbling. for more, here is our energy reporter. visit look like opec and other producers will reach a supply agreement this week? guest: at the moment, the answer
is no. it doesn't look like it will have a deal this week. saudi arabia does not expect the deal out of it. it is more of a consultation. we've heard that from some opec ministers, as well. we've also learned that russia is not going to be taking part in the september 28 meeting at the moment. the russian position is that they may join with opec in the --cussion opec can reach it an agreement with itself beforehand. but russia does not want to join that meeting in which opec is still discussing its position. yousef: we've seen opec members scrambling above the meeting to a consensus.t guest: these talks will go on through the meeting. , there isec meetings
all caps of discussion ahead of time. usually the members will reach some consensus so that when the ministers get in a meeting, they can discuss the issues and agree on the consensus. we are going to see more of that and more horsetrading and proposals as we had to the meeting week. yousef: the analysts we have spoken to keep saying bring it back to the fundamentals to get a better understanding of where the talks could go. how are the nymex -- the dynamics changing? guest: we have more supply than demand. we heard from the world's biggest traitor last week, we are still building inventories worldwide is more supply comes into the market. cut the demand forecast for this year. we've still got those fundamental basis for the market that there is too much oil. we saw the discussion that saudi arabia was proposing for the first time in two years, that
opec take some production off the table. it is an interesting proposal. it remains to be seen if that will be put into practice or if it is a trial to see where everyone is in opec. yousef: and looking at the latest comments from the iraqi oil minister, echoing some of it is in ministers, the interest of opec members to come to an agreement. the situation is dire. companies have to cover their budget deficits. is there a logical pressure to make a move even if they are not where they would like to be? guest: there are other concerns aside from the oil price. you taken a big hit in the past two years, opec's been one of the losers in the oil price drop. forhaven't taken that hit the last two years, they don't want to give up some of the gains with that -- gains they have gotten. they want to push some of the
production like u.s. shale out of the market. we've seen shale drop off. some rigs are coming back on now. they will because it that they don't want to give up those gains, and countries that have seen their market share, relative to other players in the market not want to give that up. that is especially important for saudi arabia, which is the biggest producer in opec, but other producers that are rebuilding production, they don't want to see their places in the pecking order slip. yousef: when i am looking at how much the individual opec producers are producing and trying to get an idea of who brings the most muscle into the ring. who is most at risk? guest: most influential is saudi arabia. it is clear that they have more than double the next is producers of oil output.
they having -- have a big weight in the market. if they pull back a little bit, they can take more oil off the market than the other producers. which way the saudi's go depends the out in -- outcome of this meeting. we saw this last week with the iranians. there was a lack of agreement between saudi arabia and iran that scuttled a deal before. if they are talking now, it is a sign that there is more dialogue going on. whether it will be enough to reach a decision this week, again, from what we are hearing, it does not look like a deal this week. yousef: a story that seems to change by the hour. thank you. movies has cut its rating on turkey to junk status. speaking before the decision, president erdogan said that the
downgrade was dishonest. >> i don't care at all. they're making mistakes and they are doing it intentionally. you look at places where the economy is finished, has collapsed, and they raise it. you know what countries. i don't have to say. but even though turkey has never , some look atles turkey and freeze the rating. such a thing is unacceptable. it is not honesty. yousef: for more, here is our government managing editor. let's start with the downgrade. this is a major event that we've been looking forward to for quite some time in the wake of the attempted coup. one of the main risk? -- what are the main risks? moody's has been looking at the fundamentals.
what is turkey's ability to service its debt. the two main concerns, one is slowing economic growth and the second is the strength of the institutions eared the backdrop is the coup you referenced, we had the purge of thousands of people from the government, from the judiciary, attacks against the central bank. y's international airport was bombed. turkey is in the middle of its worst incursion in years as a push in the syria and our engaged with kurdish militants. there are a lot of dark clouds on the horizon in addition to the weakening economic fundamentals. yousef: the timing is interesting because it comes off the back of comments from n.esident oregon -- erdoga
he didn't care much. what might we get off of the back of the movies decision -- moody's decision? guest: it is hard to say. people tend to be very defiant until it happens. sees his buying -- buying price go up and he is more pragmatic. after this institutional purging, we may see turkey ease up on that. we may see them cease to be so critical on the central banks and try to bring more market friendly face back. yousef: thank you. plenty more to come on the program. we hear more from the turkish president. u.s. and itst the
yousef: welcome back. you're watching bloomberg. the lower oil prices are putting pressure on saudi arabia. it is soaking up liquidity. let's get some perspective on how money can be made in this market. also, the overall outlook of the saudi economy. we are joined by the ceo of a dubai-based investment fund. rates,at these cyborg these interbank rates, one
indicator of how the quiddity is holding up in saudi arabia. it is still up 50% this year. investors really like saudi arabia. it has the population. it keeps creeping up, which is reflecting the picture of growing liquidity. but i would not say this is a critical situation. i would say we are reaching a in theterms of liquidity expecting, were are expecting an issue of $15 million. as far as the consumer is concerned, i think potentially disposable income for saudi's has jumped since last year.
it is very significant. there is a lot of pressure and insurgency around the economy. however, i think there is a lot of reform taking place which is positive for the economy, at least macro economically. i would focus on that and look forward. there has been a lot of release of value in saudi arabia. yousef: there have been reforms, and we spoke to the chairman of the capital market a few months -- weeks ago. he spoke of trying to get the foreign capital to put the work in the kingdom. the problem is, when you look at the equity market, it is the worst performing index in the region. i brought up the market relative valuation. this is a very handy bloomberg tool. it puts a valuation score on the basis of several parameters. you can see even after the
losses, which have been double digits, saudi stocks relative to their peers are still expensive. at --n see the dow there there. why should anyone by saudi stacks -- stocks? think used only today deeper and look at specific sectors. if you look at the banks, for instance. today, they are trading below their valuation. they are all trading below their book value, which is extremely attractive in the context of saudi banking, because it is a solid system despite the liquidity crunch, or the beginning of the liquidity crunch. it has been very strong in the system has been very solid. , it islook at the ratio
still very healthy and attractive. i would look at the banking sector. i would also look at the consumer, because there's been a lot of value released. the peaks we've seen in 2013, 2014. if you wanted to look at companies in the consumer sector , i would look at hershey -- they lost 60% in terms of violation. yousef: what does this do to third quarter earnings? guest: i feel that third-quarter earnings will be disappointing and weak. however, it may be a turning point in terms of companies now resuming sink. i think in the beginning of
2017, it may turn around for the saudi story. again, focus on value released. value isrket participation in a couple of holdings. andtalking about hershey, dubai the rest. ir consumer distribution. you definitely have value there. yousef: still plenty to get through including more opportunities in the region, especially in egypt as the country gears up for a possible is valuation. we will have the full story for you. this is bloomberg. ♪
a quick round up of the middle east. international finance corps and the canadian government is helping jordan curb its reliance on expensive natural gas imports. they have a solar power project. they arranged a financing project -- package. jordan has an ambitious agenda for renewable energy, spurred partially by a massive influx of refugees from syria. china -- a developer inchina plans to spend money egypt. a statement from the president's office says that the china fortune land would finance construction of a new capital city east of cairo. the city plans to build in egypt. a statement from the president's
office says that the city at a cost of about $80 billion. that is part of efforts to stimulate the economy. and a boycott was entered on wheat trading standards. it has been a headache for traders this year because of frequent rule changes. it was 70 unnecessary changes could cost each of more than 800 and $60 million this year. of a now joined by ceo dubai-based investment fund. this egypt story, the evaluation expected. i brought up a chart that shows a disparity still exists. healthy indicator of how the currencies are trading in the black market. what kind of devaluation are you expecting?
talk to me about scale and timing. guest: the official rate today is around nine. the official rate is not reflective of the right dynamics of the market. there is no dollar and the official system. in terms of timing. it is imminent. weeks, not months. committed and has managed to get the support that i nfs requested. yousef: will this be a one-time shock where he will flee float the currency, or where do you see the currency settling? guest: my expectation is that one devaluation will happen overnight and the next morning you will be trading at 11, 11.5. that is my expectation.
expectation is that it will be below because i think that it always overshoots. feel that the new fx rate will be below where the market is. yousef: we wake up on the morning of, and the currency has been devalued. in this post evaluation world, where are the opportunities, how can investors make money? guest: i think the market is distressed today. there is very little participation from foreigners. the devaluations are attractive. today, you need to look for businesses where the margins have already reflected the upcoming devaluation, and where you believe the production will come back to the previous level
where there was no difficulty to access fx. where you have some recs is on the inflation side. august, it was 15.4. yousef: you consider that the biggest macro risk? guest: absolutely. you were already 15.4 in august. has putas been -- vat more pressure on inflation. that is where you need to be careful. the's what i don't think evaluation will be as strong as people think because the central bank will be very careful with inflation not to depreciate currency too much. yousef: thanks a lot for your insight. still on the program, turkish president erdogan criticized the u.s. over it support for kurdish fighters.
cited worries over turkey's economic growth. junk -- turkey to junk. major bachelor goldman sachs may cut about a quarter of its investment banking jobs in asia, excluding japan. a person familiar with the matter says the bank will get rid of 75 jobs in the region later this yearlong in deal making. it faces its worst ranking in asia since 2000 and eight -- 2008. emerging stocks saw the biggest weekly gain in two months as stimulus.nks clinched markets managing editor joins us.
a great run for emerging stocks, what are the risks that lie ahead? guest: i suppose the most immediate risk is the u.s. election. we are likely to see considerable volatility heading .nto that episode i think after that we will see markets referring to type as people start to refocus on the fundamentals, which are improving around emerging markets. in thisourse we are environment of negative interest rates in summary places around the world. some a trillion dollars of $8 trillion of securities are rating less than zero at the moment. the relative yields on emergent market bonds again to continue to make -- remain attractive to investors. i think the u.s. election is the first event, and once we are past that, we will refocus again on what the fed is going to do.
the obvious path back to hire interest rate. yousef: it seems that investors were getting a bit nervous on friday as to whether the central banks were on the right path. to what extent is that going to be a continuous hangover? guest: my personal view is that i don't think there will be continuous hangover from friday, i think it was an instance where people saw a relatively good gainsnd sought to lock in . they went away from the weekend sitting on profit. -- not say was sick of again say it was significant. yousef: thank you very much. staying with emerging markets, turkish president erdogan has criticized the u.s. for supporting kurdish fighters in the battle against islamic state. also said he is frustrated with the delay in the extradition of a cleric he
blames for the failed coup in july. >> testimonies have been given and the orderly tour our chief of staff has said that he is behind us. said that he is their religious leader. all of this is in the records. so what are we going to prove? we have sent all of this to american authorities. we are sending it. we have such a history, for example, america has said to us, kept these 10 terrorists and give them over. we have solidarity, so we caught them, and after catching them, we deliver them to america. so now the same thing, we want the head of his organization, documents.ur
we are together in nato. we want him, give him to us and let us try him. it is very much needed. they have said the courts will decide, but we cannot wait for a decision from these court. the decision should not come from the u.s. let us make the decision. another area where you are working as an ally is syria. your put troops that you have put troops on the ground. we had an american-russian peace plan would you support. over the past week, that seems to be coming apart with each side accusing the other. you would seem to be an honest broker who can say who is to blame for this plan coming apart.
is it america's fault or russia's? we have to determine the truth. neither america nor russia is as close to syria as we are. have a 911 kilometer border with syria. aside from that, we have citizens, especially living near the border cities who have family ties in syria. we are that close together. syriaspite all of this, -- it is not just syria, it is also iraq. to bring downsaid the terrorist organizations,
when are we going to bring down the terrorist organizations? in america, they are saying we're going to bring it down with them. the coalition countries, how many countries are in syria? there are 65 countries. look, there is another terrorist organization when one gets taken out. it is being done wrong. >> you have u.s. document continuing to support the ypg, is that a source of concern? >> it is a source of concern. for example, a few days ago, america landed two planes full of weapons.
it is a great wrong before the eyes of the world. there are terrorist organizations fighting against isis. there are still children born from the terrorist organization in my country. and we say, since there are 65 countries in the coalition, let us get together. let us bring down isis. have no doubt, together we can do it. but if you get up and distinguish amongst terrorists, you are harming turkey.
because we are disturbed by this terrorist group to you are defending. it constitutes a threat to our country, by giving them weapons you are strengthening the threat to our future. subject of russia and america, estimate the beginning who was to blame. >> i want to believe that the he --o bombed the yuan, un convoy. and then right after that, we have a being delivered. after this, our people could not go in and they had to postpone. that is the situation. yousef: let's check in on the first ward headlines from around the world.
owned chinese company has been chosen to design a $2.1 billion powerplant in zimbabwe. by a companyowned that is also raising funds through equity and debt. many of the potential investors have said they will help finance . u.s. regulators have real the reports showing continued takata's airbags. many continued rupture when tested. takathonda was one of their bit customers and says it is investigating potential problems with their accident not been recalled. an arrestissued warrant for men over corruption
allegations. he controls the maxis group. they also seek to detain the deputy chairman at the asian networks. in 2014, supreme court ordered samsung's chairman to appear before judges in a payment dispute. that case is still pending. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 160 countries. this is bloomberg. still to come, gold on a roll. we will discuss the precious metal. that is next and plenty more. this is bloomberg. ♪
world's top producer of nickel could shut down a large proportion of its mine unless they prove their environmental impact. of -- leased the results age 12 -- 12 lines are on the chopping block. the majority produce nickel. about 40 metallic mines in the philippines. nickel is among the country's top export. philippinesto the for the metal. it all comes down to the fact that the new environment secretary is hugely anti-mining, particularly of open pit
operations. she wants the philippines to adopt or surpass australian standards, and the president is behind her on this. we also know at this stage that the environment bureau had already drafted the civic recommendations for each miner , and anyone non-complaint will be given a grace. before they are shut down. nickel prices have rallied on the global market before the , demandn began outstripping supply. could hit critically low numbers by early next year. beyond possible suspensions on monday, there is a congressional proposal to ban mineral ore exports. let's stay with commodities and talk about precious metals. by jeffrey.
great to have you on the program. -- is gold back in fashion? have got the opec meeting in algiers, the informal one coming up on december 28. how does this affect her outlook for the metal? this will last year it has been the fed rather than oil. gold has never been out of fashion. -- 2016, it has not. it is currently sitting around 1350. i think we will go there again. year's high has been 1375. i have every --
yousef: the fed decision helped push gold above the line. i brought up the commodities function here. it gives us an overview of precious metals. i would like to point out the median forecast for the fourth quarter. bound,retty much range pre-much all the way through here to 2017. do you disagree? guest: what range are we talking about? could gold go to 1450? quarter, withond thousand 344. range.we are within that the long-term patterns are interesting. we're pushing up against a fast here -- five year downtrend.
i would say a break and close above 1365. we are in new territory. we heading into a u.s. presidential election the become isn't really going to too good for the u.s. dollar. , withk as we head into q4 the election and given the fact that we are pushing against a critical point, we could see gold make a move much higher than 1350, 1360. i am really at the potential for 1450 two 1500 before the year is and. yousef: what about the rest of the precious metals? silver always more volatile. is there more of an excited with silver or platinum -- upside with silver or platinum? you could argue that gold has
been exhausted. what about the others? little --verware silver will do more. i could easily see a $25 silver price over the next six months. silver definitely. platinum and palladium definitely fundamentally more upside for both. i think the one to watch is palladium. it has done well this year, up about 25%. i could see a four digit number for palladium, above a thousand dollars based on fundamentals. every more, more palladium is pursuing -- consumed them produce. eventually, you will see palladium break higher. crude tennis -- tend to go in the same direction.
60% of all palladium is in the auto sector. crude and palladium to me are linked, but the top tip in 2017 is palladium for me. yousef: the bloomberg median forecast is one that is looking to the downside across all come through 2017. what is going to happen -- we get to the u.s. election, and there we have the next possibility that a rate come hi, how does that affect how you position your holdings? would you sell before that? guest: no. i never sell gold, i just wait to buy. i think the key will be to get the rate hike in december and gold will move higher. buyers are waiting in the wings for the rate hike. they know it is coming. why risk a sharp reversal when the rate hike happens?
for me, an increase of interest rates will signal a fresh ways of buying for gold. yousef: will be the top performing precious metal? guest: palladium. but gold is going higher. yousef: what will be the weak link? it sounds like platinum. guest: i am bullish across the whole thing. under perform, probably platinum. even gold may underperform in percentage terms, but in actual terms -- the elephant in the room in precious metals is gold. a gold price around $1500 would be no great surprise. aboveium, definitely $900, possibly about $1000. platinum i see at about $1200, but i like silver.
silver always does more than gold. if you look at volatility, it is double. if you're going to see a move, if i had to pick two, palladium and silver. yousef: but you feel strongly about pre-much all of them. i would definitely be on the precious metals sector in 2017. yousef: a pleasure. still to come on the program, the technology kind bitcoin is in focus again, this time with an ambitious goal. this is bloomberg. ♪
♪ yousef: welcome back. you are watching bloomberg. the company behind the technology of bitcoin has an ambitious goal. the already have 100,000 downloads a week and says it is targeting 100 times that in the next few months. we spoke to the company's cofounder and president at a summit in beijing. >> we think will hit around 10 million by the end of the year. that is just getting started. we talked about how we're getting to the next 10 million or 100 million, it is about billing an open and accessible financial future for everyone. with a simple piece of software, they can start to receive and make economic transactions basically for free.
if you compare that to what it takes to set up a bank account or get a credit card, you can start see how simple this will be for many people. there are 2.5 billion people with no access to financial services. 4 billion people with no credit cards. research from goldman sachs came millennials will have bank accounts within five years. how are they going to use financial services? app.will download an china has minute the forefront of pushing innovation in the space. we are here to make friends and look at partnerships. i think your continued be an exciting place for this innovation to take place. there are a lot of times -- reasons why this will continue to be exciting, and one of them is excitability. -- accessibility. there is a lot of smartphone adoption here. wherever there is friction in
financial services, there is a lot of opportunity for digital currencies. in a lot of countries, you will see growth in that kind of thing. yousef: that is it for this edition of "bloomberg markets middle east." algiersbe live from wrote the week to get to the story from the ground there as opec members try to hash out some formal consensus. we have been getting different comments from individual members. at the moment, most analysts surveyed fear -- feel there could be an agreement at the meeting in algiers. we are looking at iraq. 500,000 barrels a day is what they feel should be additional supply. analysts are also pointing to that this lays the groundwork for the official meeting in vienna later in the year.